Opinion
No. 1-998 / 00-1615
Filed August 28, 2002
Appeal from the Iowa District Court for Cass County, Charles L. Smith III, Judge.
Akin Building Center appeals from a district court's ruling entering judgment in favor of Phil and Kerry Barrett and sanctioning Akin's attorney.
JUDGMENT AFFIRMED; WRIT ANNULLED.
Andrew J. Knuth and John M. Trewet, of Rutherford, Trewet Knuth, Atlantic, for appellant.
Joanne C. Lorence, of Otto, Lorence Barry, Atlantic, for appellee.
Heard by Vogel, P.J., and Miller and Vaitheswaran, JJ.
Akin Building Center appeals from a district court's ruling entering judgment in favor of Phil and Kerry Barrett and sanctioning Akin's attorney. Akin contends (1) the trial court erred in failing to recognize the parties' accord and satisfaction, (2) the Barretts did not prove negligence regarding the construction of their house, and (3) the court erred in ordering a sanction against its attorney. The Barretts request appellate attorney fees. We affirm the district court's judgment in favor of the Barretts. We treat Akin's challenge to the sanction as a petition for a writ of certiorari, grant the petition, and finding no merit to the challenge, annul the writ.
I. BACKGROUND FACTS.
On March 30, 1994, Phil and Kerry Barrett (Barretts) and Akin Building Center entered into a building contract for the construction of a new home in Atlantic. The contract price to be paid Akin was $144,630. The manager of Akin at that time was Steve Riggs. During the construction process, the Barretts requested a limited number of additions to the contract, and there were a few deletions. The net total cost of the changes was an increase of $1617.39, which made the total contract price $146,247.39. The contract price was adjusted accordingly.
The Barretts moved into the house around December 1, 1994, although it was not completed and certain defects had been identified for which repairs were necessary. By the time they moved into the house, the Barretts had made payments on the contract totaling $135,000. They withheld the final payment of $11,247.39 until the house was finished and the repairs completed.
Riggs was relieved of his duties in 1996. His replacement at Akin, Chris Knuth, met with the Barretts in the spring of 1998 regarding the house and balance due on the contract. Although internal accounting showed the Barretts still owed Akin $28,321.31, Knuth agreed at trial that the Barretts did not owe this amount under the parties' contract. The Barretts agreed to pay $5247.39 for the balance due on the contract, and they would pay for the repairs themselves. When the Barretts had someone come in to make minor repairs to their home, they learned their house had settled, and they might need to have it mud jacked to level it out. They paid Thrasher Basement Systems $23,500 for the necessary repairs.
The Barretts filed this suit, alleging that Akin (1) negligently constructed their home by its negligent acts and omissions, (2) breached the express and implied warranties it made to them, and (3) generally directed and performed the construction of the home in an unsatisfactory manner. They sought damages in excess of $23,000. Akin answered and filed a counterclaim, alleging that the total sum spent on construction was $168,447.99, the Barretts failed to pay it in the amount of $23,073.94, the parties agreed to forego payment by the Barretts of $23,073.94 as complete settlement of all matters associated with the contract, and the Barretts breached their promise regarding settlement of this matter. Akin requested damages in the amount of $23,073.94. The district court entered judgment in favor of the Barretts and ordered Akin to pay damages in the amount of $26,200. It also sanctioned Akin's attorney for filing a counterclaim in violation of Iowa Rule of Civil Procedure 1.413(1) and ordered him to pay $2040.25. Akin appeals.
II. ACCORD AND SATISFACTION.
Akin contends that the trial court failed to recognize the parties' accord and satisfaction. It argues the Barretts withheld contract proceeds from it pending repairs of deficiencies in their house. It maintains that when it was unable to accomplish these repairs, the Barretts received a balance due reduction of at least $6000, and possibly as much as $23,000, in satisfaction of their complaints for repairs. It argues the Barretts paid it $5247.39 in full satisfaction of their obligation to Akin, and Akin agreed to write off the balance due from the Barretts in full satisfaction of claims for defects in the house. It contends that if there was no accord and satisfaction, then it is entitled to the cost overrun of $22,019.61 it incurred to build the Barretts' home.
A. Scope of review. This action was tried as an action at law. Therefore, our scope of review is for the correction of errors at law. Iowa R. App. P. 6.4.
B. Merits. An accord is an agreement in which the parties agree to discharge a preexisting contract or cause of action by giving and accepting a substituted consideration in settlement of the claim. Seidler v. Vaughn Oil Co., 468 N.W.2d 474, 475 (Iowa Ct.App. 1991). The satisfaction is the execution or performance of the agreement. Id. Both debtor and creditor must intend the substituted consideration as an accord and satisfaction of a preexisting claim. Id. at 477. Proof of the required intent may include the agreement itself, the parties' words or actions, and the surrounding circumstances. Id. The creditor's intent is established if it is shown she knew or should have known the substituted consideration was intended as an accord and satisfaction. Id. Whether intent exists is a fact question and cannot be decided as a matter of law. Id.
Accord and satisfaction only applies to unliquidated claims. Id. at 476. A claim is unliquidated if there is a genuine dispute regarding either the amount due or the debtor's liability. Id. A creditor's claim is liquidated if the amount of the claim is definite, determined, and fixed. Id. The defendant bears the burden of proving accord and satisfaction by a preponderance of the evidence. Hengesteg v. N. Eng'g, Inc., 478 N.W.2d 307, 309 (Iowa Ct.App. 1991).
Akin filed a counterclaim, alleging the plaintiffs failed to pay $23,073.94, the difference between the amount listed on Akin's account and the amount paid by the Barretts. It contended that in July 1998, the Barretts and Akin agreed to forego payment by the plaintiffs of $23,073.94 as a complete settlement of all matters associated with the parties' original contract. It alleged the Barretts' filing of the petition in this matter breached the promise made by the Barretts in July 1998 regarding the settlement. Akin requested damages in the amount of $23,073.94.
We conclude the trial court correctly found that Akin failed to present evidence supporting its counterclaim. Riggs and Chris Knuth testified that the Barretts did not owe the $23,073.94, as that amount was a cost overrun as shown by Akin's internal accounting rather than a contractual obligation. Thus, to the extent there may have been an accord and satisfaction, it was only as to the amount due on the contract and needed repairs that had been identified. It did not cover Akin's construction cost overrun. Therefore, Akin's counterclaim is without merit as determined by the trial court.
III. NEGLIGENCE.
Akin contends that the Barretts did not prove negligence regarding the construction of their house. It argues the evidence and testimony of witnesses do not support the court's findings that there was negligence in the construction of the house. A. Scope of review. This contract case was tried as a law action. Therefore, our review is for correction of errors of law. Equity Control Assocs., Ltd. v. Root, 638 N.W.2d 664, 670 (Iowa 2001). The trial court's factual findings have the effect of a special verdict and are binding if supported by substantial evidence. Id. Evidence is substantial when a reasonable mind would accept it as adequate to reach a conclusion. State v. Bonstetter, 637 N.W.2d 161, 165 (Iowa 2001). We view the evidence in a light most favorable to the trial court's ruling. Equity Control, 638 N.W.2d at 670. We construe the trial court's findings broadly and liberally in favor of upholding the judgment. Id.
The trial court ruled in favor of the Barretts on both the breach of warranties theory and the negligence theory. Akin does not challenge the part of the trial court ruling that finds in favor of the plaintiffs on the breach of warranties theory. We can therefore affirm the trial court's judgment for damages on the sole basis that Akin has waived any claim of error concerning the warranties theory. We choose, however, to also address the negligence issue.
We recognize that the plaintiffs' remedy most likely lies in contract law alone, and not tort law. See Determan v. Johnson, 613 N.W.2d 259, 263-64 (Iowa 2000) (holding that where a plaintiff's claim is based on unfulfilled expectations with respect to the quality of the object of the contract, with the harm alleged being to the object of the contract and not to the plaintiffs' persons or other property, the remedy lies in contract law, not tort law). However, as Akin does not challenge the legal viability of the plaintiffs' negligence theory, we address only the question of whether substantial evidence supports the trial court's findings and decision on the negligence theory.
B. Merits. The district court found Akin was negligent in (1) failing to perform a soil bearing test after it was authorized by the Barretts, (2) its supervision of its employees and subcontractors it hired, who failed to properly place the foundation on the footings and failed to properly install the drainage system, (3) failing to install the sump pump pit called for in the design plans, and (4) substituting, without authorization, a wooden beam for a main steel beam called for in the design plans. After reviewing the record in this case, we conclude substantial evidence supports the trial court's factual findings.
William Churchill, a structural engineer, believed the settling of the house was due to the fact that the foundation walls had been placed eccentrically on the edges of the footings. Tom Bilyeu of Thrasher Basement Systems, Inc. opined that the settling was possibly due to the block walls being placed on the edges of the footings, the "Form A Drain" next to the footing was unable to drain, and the soil consistency was clay or gumbo.
Riggs and Churchill both believed a soil test was necessary, but it was not done. This was Akin's responsibility. There was ample testimony that the foundation wall was not concentric to the footing, and there was one location where there was no footing at all under one wall. The outlet for the "Form A Drain" was directed upwards. Thus, the drain was unable to work properly. Riggs decided not to install the sump pump pit. Churchill and Bilyeu thought installing the pit would have helped to alleviate some of the water problems. Akin substituted a wooden beam for a steel beam. Akin's experts, Gary Anderson and Dennis Templeman, testified the wooden beam was not adequate support as a substitute for the steel beam. We affirm the trial court on this issue.
IV. SANCTION.
Akin contends that the trial court improperly imposed a sanction on its attorney. It points out the trial court made no finding that counsel failed to read the counterclaim, that counsel had not conducted reasonable inquiry into the facts or law at the time he signed the counterclaim, or that counsel signed the counterclaim with an improper motive. It also asserts no evidence would support such findings.
Preliminarily, we note that this claim should have been brought by petition for a writ of certiorari. Hearity v. Iowa Dist. Ct., 440 N.W.2d 860, 862 (Iowa 1989). However, we treat the notice of appeal as a petition for a writ of certiorari, Iowa R. App. P. 6.304; Harris v. Iowa Dist. Ct., 570 N.W.2d 772, 774 (Iowa Ct.App. 1997), and we grant the petition. In doing so we pass the question of whether Akin has standing to challenge the imposition of a sanction on another person, its attorney. We review the assignment of error in a certiorari context. Harris, 570 N.W.2d at 774.
A. Scope of review. We will grant a writ of certiorari when an inferior tribunal has exceeded its jurisdiction or otherwise acted illegally. Id. at 776. We may sustain the proceedings below, annul the proceedings wholly or in part, or prescribe the manner in which either party may proceed, but we may not substitute an amended order for that of the district court. Id.
We review for an abuse of discretion. Id. We will find an abuse of discretion when the district court exercises its discretion on grounds or for reasons clearly untenable or to an extent clearly unreasonable. Id. An exercise of discretion is unreasonable if it is not based on substantial evidence. Id. We will correct erroneous application of the law in the exercise of that discretion. Id.
B. Merits. Iowa Rule of Civil Procedure 1.413(1) provides, in pertinent part as follows:
Counsel's signature to every motion, pleading, or other paper shall be deemed a certificate that: counsel has read the motion, pleading, or other paper; that to the best of counsel's knowledge, information, and belief, formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or cause an unnecessary delay or needless increase in the cost of litigation. . . . If a motion, pleading, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay the other party or parties the amount of the reasonable expenses incurred because of the filing of the motion, pleading, or other paper, including a reasonable attorney fee.
Under rule 1.413(1), signing a motion, pleading or other paper constitutes certification the signer (1) has read the motion, pleading, or other paper; (2) has concluded after reasonable inquiry into the facts and law there is adequate support for the filing; and (3) is acting without any improper motive. Harris, 570 N.W.2d at 776. Each duty is independent of the other, meaning a breach of any one constitutes a violation of the rule. Id.
Because we believe this claim is properly resolved under the second requirement, that an attorney has concluded after reasonable inquiry into the facts and law that there is adequate support for the filing, we only discuss the law relevant to that issue. The duty to make a reasonable inquiry requires the signer to
certify that to the best of his knowledge, information, and belief, formed after a reasonable inquiry, the pleading, motion, or other paper is (1) well grounded on the facts and (2) warranted either by existing law or by a good faith argument for the extension, modification, or reversal of existing law.Schettler v. Iowa Dist. Ct., 509 N.W.2d 459, 465 (Iowa 1993) (quoting Weigel v. Weigel, 467 N.W.2d 277, 280 (Iowa 1991)). The reasonableness of the inquiry is measured as of the time the paper was filed and is measured by an objective standard. Harris, 570 N.W.2d at 776. The test is reasonableness under the circumstances, and the standard used is that of a reasonably competent attorney. Id. To determine whether an attorney's inquiry into the facts and law was reasonable, the court considers all relevant circumstances, including those factors set forth in Mathias v. Glandon, 448 N.W.2d 443, 446 (Iowa 1989). Id. at 776-77.
Akin's attorney filed an answer to the Barretts' petition on December 3, 1999. He did not file the counterclaim until May 5, 2000, five months later. The trial in this matter commenced July 12, 2000. The time between the filing of the petition and counterclaim allowed him adequate time to inquire into the facts and law pertaining to the counterclaim. The facts related to the counterclaim were not complex, and were in the possession of Akin rather than an opponent or third person. Yet, at trial, contrary to the allegations of the counterclaim, which asserted an amount owed based on Akin's record of costs incurred in the project, Riggs and Chris Knuth testified that the amount representing Akin's cost overrun as shown by Akin's internal accounting was not at issue, and the Barretts did not owe that amount. Akin's counterclaim is premised on the Barretts owing that amount. Thus, the counterclaim clearly was not based on the facts, as shown by the testimony of Akin's own witnesses. Akin's attorney did not fulfill his duty to make a reasonable inquiry, because the counterclaim was not only not well grounded on the facts, it was directly contrary to readily ascertainable facts.
Although the trial court made no express finding that Akin's counsel had not conducted reasonable inquiry into the facts, we presume this factual matter was resolved in the manner necessary to support the trial court's ruling on the matter. See Bankers Trust Co. v. Fidata Trust Co., 452 N.W.2d 411, 413 (Iowa 1990) (stating the reviewing court will presume the trial court decided the facts necessary to support the decision); Brichacek v. Hiskey, 401 N.W.2d 44, 46 (Iowa 1987) ("When no motion to enlarge or amend was made, we assume as fact an unstated finding that is necessary to support the judgment."). Because the evidence supports the necessary but unstated finding, we assume as fact that finding. We annul the writ of certiorari.
V. ATTORNEY FEES.
The Barretts request appellate attorney fees, and have submitted an affidavit of attorney fees and costs. They argue that they prevailed at trial, Akin's appeal has forced them to defend the case on appeal, and the appeal is without merit. Akin has moved to strike the affidavit, as well as Issue IV of the Barrett's brief, which requests appellate attorney fees.
A successful party ordinarily cannot recover attorney fees unless they are authorized by statute or agreement. Audus v. Sabre Communications Corp., 554 N.W.2d 868, 874 (Iowa 1996). The Barretts have failed to point to any statute or agreement authorizing an award of appellate attorney fees in this case. Accordingly, we decline to award appellate attorney fees. We find it unnecessary to address Akin's motion to strike.
VI. CONCLUSION.
We conclude the district court correctly determined Akin's counterclaim was without merit. We affirm the district court's judgment for damages under the breach of warranties theory. We conclude there was substantial evidence supporting the district court's findings of negligence. We find no merit to the challenge to imposition of sanctions against Akin's attorney. We deny the Barretts' request for appellate attorney fees.
JUDGMENT AFFIRMED; WRIT ANNULLED.